Bowman Offshore Bank Transfers: Want to Put Money in an Offshore Account? Here's What You Need to Know

condo in another country may find it beneficial to have a bank account in the local currency to pay their
bills.
Other people may choose to open a foreign bank account for currency diversification. This investment
strategy involves holding assets in several different currencies to minimize the risk of losing value should
the purchasing power of the dollar weaken. What's more, interest rates may be higher in other countries
as compared to what is currently offered at U.S. banks.
Don't discount the drawbacks to foreign banking. Keeping money in a foreign bank account isn't
risk-free. A country hit with a recession could see its currency devalued and that could mean a person's
bank account will be worth significantly less.
Another concern is political instability, which could lead to policy changes. Although the chance is rare,
Sargent says a new regime could decide to nationalize banks and seize foreign assets.
More likely, in his opinion, is the chance of identity theft or other cybercrimes. "Believe it or not, we have
some good security in the [U.S.] information services sector," Sargent says. Other countries may not have
the same level or security, or their consumer protection laws may not protect people who lose their money
because of fraudulent transactions on their account.
Don't plan to use an offshore account to evade taxes. For some, offshore accounts have been used
as a tax shelter. Money placed in a foreign bank account could be invested, and the IRS would never know
about income earned from those assets.
Instead of paying U.S. tax rates, affluent households could set up a second residence in a country like
Monaco, where there is no personal income tax, and keep their money in accounts there. "It's not you or
me," Sargent says of those who use foreign tax shelters. "It's people who live a different life [than the
average family]."
The problem is this strategy is illegal. By law, U.S. citizens need to pay taxes on all income, regardless of
where it is earned. That means any interest or gains earned on foreign investments must be included on
federal tax returns. However, in the past, countries such as Switzerland and Bermuda didn't require
information about U.S. account holders to be released, which meant people could easily conceal their
earnings and avoid paying taxes.
That's changed in recent years, as the U.S. has been actively working to eliminate the use of these tax
shelters. Most notably, agreements have been made between countries to facilitate the release of banking
information from traditional tax havens like Switzerland.
It's no longer a question of if someone will be caught for foreign tax evasion but when, Ziering says. "[It]
was simple before the IRS enforcement," she says, "[but] a using offshore account to hide money doesn’t
make sense anymore."
Understand the IRS requirements for offshore accounts. As part of its attempt to crack down on
tax evaders, the IRS now requires people to declare whether they own any foreign assets or have signature
authority on a foreign bank account. Failure to make this declaration could result in a penalty equal to
half the balance held in the account.
Any interest or capital gains earned on money in another country must be declared at tax time as well.
Under the Foreign Account Tax Compliance Act, some foreign banks will report this information to the
IRS to help ensure U.S. residents meet their tax obligations. Finally, those who have more than $10,000
in assets across all foreign accounts must submit an annual Report of Foreign Bank and Financial
Accounts form.
Having money in a foreign bank account isn't illegal, and it can be convenient for those who maintain a
second home outside the U.S. or travel frequently. However, before you open an offshore account, make